Tata Steel BSL Ltd(Merged) Management Discussions.

BUSINESS OVERVIEW

The following discussion and analysis should be read in conjunction with Tata Steel BSL’s audited standalone / consolidated financial statements and related notes for the year ended March 31, 2021 included in this Annual Report.

A. INDUSTRY STRUCTURE AND DEVELOPMENTS External Environment Global Economy & Steel Industry

The global economy was significantly impacted by COVID-19 led disruptions in 2020 resulting in contraction across the leading economies barring China. China has been the only major economy to register a growth of 2.3% in 2020, whilst other economies witnessed a contraction. Although recovery was seen in the second half of 2020 with lifting of lockdowns, it has been inconsistent across countries due to resurgence of infections, varying levels of policy support and access to medical facilities. In view of the same, the International Monetary Fund (‘IMF’) estimates that the global economy shall contract by -3.5% in 2020 as against a growth of 2.8% in 2019. The steel industry (excluding China) also witnessed a significant decline in production and demand during the first half of 2020. However, an almost equally stronger recovery has been witnessed in the second half of the year. According to World Steel Association (‘WSA’), global crude steel production reached 1,864 million tonnes in 2020, down by 0.9% as compared to 2019. China has produced 1,053 million tonnes of crude steel in 2020, up by 5.2% over 2019. China’s share of global crude steel production has also increased from 53.3% in 2019 to 56.5% in 2020. Global steel demand has also seen only a minor contraction of ~0.2% in 2020 due to a very strong recovery in China during H12020 and a better than expected rebound in the rest of the world during H2 2020.

Indian Economy & Steel Industry

The COVID-19 pandemic resulted in a nation-wide lockdown in India in Q1FY2021 and was one of the strictest lockdowns globally. This resulted in a GDP contraction of ~24% in Q1FY2021 as most of the economic activity was halted during April-May. However, India has witnessed a gradual resumption of economic activity from Q2FY2021 onwards. The initial recovery was driven by government spending on infrastructure, exports and rural economy. The recovery has gained momentum since August 2020 with pickup in consumption demand driven by festive buying and return of urban consumption resulting in GDP growth of 0.4% in Q3 FY2021. Despite this recovery, India is estimated to see a contraction of ~8% in the annual GDP of FY2021 due to sharp fall seen in H1FY2021. India’s steel industry has also su_ered from production losses due to lockdown in Q1FY2021 and recovered gradually since then, initially driven by exports followed by gradual recovery in domestic demand. A strong rebound in manufacturing and infrastructure development activity during H2FY2021 has led to a sharp rise in both production and consumption of steel in India. According to the Joint Plant Committee, India’s crude steel production has reached ~92 million tonnes during the period April 2021 to February 2022 and is estimated to reach 103 million tonnes by end of FY2021, registering a decline of ~5.5% over the last year. India’s finished steel demand is estimated to be ~93 million tonnes for FY2021 as against ~100 million tonnes in FY2020, a drop of ~7%.

B. OUTLOOK

Global Economy & Steel Industry

Although economic activity witnessed a strong rebound towards the end of 2020, COVID-19 is expected to have a lasting impact going forward, as many countries and sectors are going through an uneven recovery. While the current recovery momentum is well supported by ongoing vaccination and stimulus measures, renewed waves and new variants of the virus continue to pose concerns on the outlook. Against this backdrop, IMF is projecting the global economy to grow by 5.5% in 2021 as against the estimated contraction of -3.5% in 2020. In its 14th Five Year Plan, China has announced a 6% GDP target for 2021 with emphasis on reforms, innovation and high-quality development.

WSA is projecting the world steel demand to reach ~1,874 million tonnes in 2021, growing by 5.7% over 2020, supported by expected stabilization in COVID-19 infections by mid-2021 and a steady progress in vaccination resulting in gradual return to normalcy in major steel using countries by the end of the year. China’s steel demand is projected to cross the billion-ton mark in 2021 with total finished steel consumption of 1,025 million tonnes, growing by 3% over 2020. With expected steel demand growth of ~9.3%, the share of the world, ex-China, in global consumption is expected to increase to 45% in 2021 from 44% in 2020. However, China will continue to dominate the global steel industry with a share of ~55%.

Indian Economy & Steel Industry

India is expected to witness a full economic recovery in H2FY2022 and is projected to grow by ~9.5% in FY2022 driven by

(a) ongoing vaccination supporting the current recovery momentum;

(b) restart of investment cycle with significant spending on infrastructure and

(c) continued recovery in consumption supported by urban demand, accentuated by work-from-home and preferences for personal mobility along with rising rural incomes and a_ordability. However, normal growth levels would only be seen in FY2023, provided no further economic disruption occurs and the vaccination drive achieves its target of covering more than 30% of the population by end of 2021.

Within the steel industry, current production and consumption levels are indicating a near full recovery. Continuing the current momentum and new capacities coming on stream, India’s crude steel production is expected to reach ~116 million tonnes in FY2022, growing by ~12.5% over last year. India’s finished steel demand is also expected to reach 107 million tonnes in FY2022, up by ~15% over FY2021, driven by strong infrastructure spending and sustained demand of automotive and consumer durables.

C. OPPORTUNITIES AND THREATS Opportunities

Government focus on strengthening the domestic manufacturing base under the Atmanirbhar Bharat program presents a strong opportunity for steel consumption in India. The production linked incentive scheme, which intends to incentivise the additional production in India, is expected to boost steel demand in automobile & auto components, consumer durables, solar equipment, telecom, etc.

The Government has announced an investment of over Rs.1 trillion in infrastructure over the next 5 (five) years. This would be a key growth driver not only for steel but will also be a multiplier of growth across the sectors, boosting steel demand from sectors such as transportation, real estate and urbanization as well.

Emergence of new trends after COVID-19, such as work from home, preference to physical distancing would create additional demand for furniture, personal mobility, etc. In addition, the rise in e-commerce activity will support the growth of warehousing and light commercial vehicles.

Threats

Resurgence of infections leading to fresh lockdowns, both localized as well as at regional / national levels resulting in disruption in economic activity. Large dependence of the agricultural sector on monsoon. In the last 2 (two) years a normal monsoon has supported the growth in the agricultural sector.

Slower recovery in services, which is the backbone of Indian economy.

D. CONSOLIDATED FINANCIAL PERFORMANCE

The Company is engaged in Steel business. Brief performance of the Company is as follows:

(Rs. crore)

Particulars FY21 FY20 Variation
Turnover 21,419 18,199 3,220
PBDIT 5,448 2,350 3,098
Interest and Financial Charges 1,529 1,655 (126)
Depreciation 1,491 1,463 28
Exceptional Item(s) - 69 (69)
Profit / (Loss) After Tax 2,518 (628) 3,146

FY2021 production at 4.08 Mn tons was lower by 9% over FY2020, primarily due to disruption caused by the COVID-19 pandemic in H1FY2021.

Sales during the current year was higher by 4% over the previous year as a result of improvement in the demand in domestic markets and higher exports. Total sales in FY2021 stood at 4.31 million tons as against 4.14 million tons in FY2020.

Financial Performance & State of Affairs (Consolidated):

During the year, the Company recorded a net profit of _2,518 crore (previous year: Loss of Rs.628 crore). The basic and diluted earnings per share stood at Rs.23.03 and Rs.6.57 for FY2021.

The analysis of major items of the financial statements is given below:

a) Net sales and other operating income

(Rs. crore)

FY21 FY20 Change (%)
Sale of Products 19,977 17,238 16
Other Operating Income 1,442 961 50
Total Income from Operations 21,419 18,199 18

During the year, the overall turnover was higher in line with increase in sales by 4% along with improvement in realisations driven by better market conditions. The increase in other operating income was on account of higher revenues from sale of Direct Reduced Iron, scrap and other by products.

b) Raw materials consumed

(Rs. crore)

FY21 FY20 Change (%)
Raw materials consumed 10,024 10,775 (7)

During the year, raw material consumption decreased by 7% due to decrease in prices of various raw materials and lower production volumes.

c) Employee Benefits Expense

(Rs. crore)

FY21 FY20 Change (%)
Employee Benefits Expense 649 409 59

The employee cost increased primarily on account of a new arrangement with the Companys subsidiaries viz., Tata Steel Technical Services Limited and Tata Steel Support Services Limited effective April 1, 2020. Both subsidiaries commenced the business of manpower supply to the Company. The employees engaged by these subsidiary companies were earlier working with the Company on contract basis.

d) Depreciation and Amortization expense

(Rs. crore)

FY21 FY20 Change (%)
Depreciation and amortization expense 1,491 1,463 2

Depreciation and amortization expenses were marginally higher in line with additions during the year. e) Other Expenses

(Rs. crore)

FY21 FY20 Change (%)
Other Expenses 4,603 4,916 (6)

The details of other expenses are given below:

(Rs. crore)

FY21 FY20 Change (%)
Consumption of stores and spares 1,331 1,412 (6)
Packing material consumed 76 78 (2)
Power and fuel 1,043 1,100 (5)
Rent 1 129 (99)
Repairs & Maintenance 325 177 84
Selling and Distribution 981 997 (2)
Other Expenses 846 1,023 (17)
Total Other Expenses 4,603 4,916 (6)

Other expenses were lower as compared to the previous year mainly on account of lower production. This decrease was partially offset by higher repair and maintenance expenses incurred on account of relining and other mechanical contract jobs.

f) Finance Costs and Net Finance Costs

(Rs. crore)

FY21 FY20 Change (%)
Finance Costs 1,529 1,655 (8)
Net Finance Costs 1,470 1,604 (8)

The reduction in finance cost is on account of prepayment of term loan by Rs.5,500 crore and decrease in interest rate.

g) Exceptional Items

(Rs. crore)

FY21 FY20 Change (%)
Exceptional Items 0 69 (100.00)

The gain in FY2020 represents the effects of implementation of resolution plan - Rs.154 crore, partly offset by provision for impairment on property, plant and equipment and other assets (_85 crore).

h) Fixed Assets

(Rs. crore)

FY21 FY20 Change (%)
Property, Plant and Equipment and Right-of-use assets 28,622 29,753 (4)
Capital work-in-progress 442 682 (35)
Other Intangible assets 16 21 (21)

During the year, depreciation and amortization expense amounted to _1,491 crore. Further, gas-based boiler plant was capitalized during the year amounting to _215 crore.

i) Inventories

(Rs. crore)

FY21 FY20 Change (%)
Raw Material 1,475 1,340 10
Finished Goods & Work -in- progress 1,472 2,162 (32)
Stores, Spares & Others 1,426 1,338 7
Total Inventory 4,374 4,839 (10)

The reason for decrease in inventory is mainly due to decrease in stock of finished and semi-finished goods by _690 crore due to liquidation of steel inventory by 252 KT from March 2020 levels. j) Trade Receivables

(Rs. crore)

FY21 FY20 Change (%)
Gross Debtors 525 798 (34)
Less: Provision for doubtful debts 102 95 7
423 702 (40)

There has been a decrease in the balance of net trade receivables by _280 crore mainly on account of faster collection from customers and better credit management. k) Cash Flow

(Rs. crore)

FY21 FY20 Change (%)
Net Cash Flow from Operating Activities 8,160 1,866 337
Net Cash Flow from Investing Activities (663) 293 (326)
Net Cash Flow from Financing Activities (7,484) (1,951) 284
Net increase / (decrease) in cash and cash equivalents 13 209 (94)

The cash flow from operating activities was _8,160 crore as compared to Rs.1,866 crore during the previous year. The increase was mainly on account of improvement in operating performance and release of working capital. The cash outflow from investing activities was _663 crore as compared to inflow of Rs.293 crore during the previous year. The outflow during the year broadly represents purchase of current investments. The cash outflow from financing activities was Rs.7,484 crore as compared to Rs.1,951 crore during the previous year. The outflow during the current year represents repayment of external borrowing by Rs.6,137 crore and interest payment.

The Company continues to focus on liquidity management by prioritization of payments and review of collection plans and 3 months rolling cash flow forecast through daily cash calls and working capital management.

E. CHANGES IN KEY FINANCIAL RATIOS

The details of changes in the key financial ratios as compared to the previous year are stated below:

FY21 FY20 Change (%)
Debtors Turnover (Days) 10 14 (32)
Inventory Turnover (Days) 79 95 (40)
Interest Coverage Ratio (Times) 2.69 0.55 387
Current Ratio (Times) 1.16 1.66 (30)
Debt Equity Ratio (Times) 0.51 0.91 (43)
Net Debt Equity (Times) 0.45 0.86 (48)
Return before exceptional item to Net Worth (%) 11.99 -3.77 418
EBITDA Turnover (%) 25.44 12.91 97
Net Profit before exceptional item to Turnover (%) 11.76 -3.45 440

1. Debtors Turnover Ratio – The fall is primarily on account of faster collection from customers and better credit management.

2. Inventory Turnover Ratio – The decrease is mainly due to decrease in stock of finished and semi-finished goods attributable to improved market conditions.

3. Interest Coverage Ratio (Times) – The increase was on account of better operating profits driven by improved margins.

4. Current Ratio (Times) – The drop was mainly on account of increase in trade payables.

5. Debt Equity Ratio (Times) and Net Debt Equity (Times) – Strengthened as the Company has made significant pre payments of the bank loan during the year . Net debt further decreased due to higher current investments.

6. Return before Exceptional Item to Net Worth– The return is higher on account of improvement in operating profit and lower interest cost.

7. EBITDA turnover – The reduction is primarily on account of higher demand, improved market conditions and significant cost savings on account of efficiencies and improvement measures.

8. Net Profit before exceptional item to Turnover – The return is higher on account of improvement in operating profit and lower interest cost.

F. OPERATIONAL EXCELLENCE: BE1 PROGRAM

The Be1 Program (Program) - the flagship multi-dimensional excellence program driving operational, commercial, financial and capability excellence - continued in its 3rd year at the Company. Despite the onset of the COVID -19 pandemic, the Program has been expanded to 26 operational impact centers in FY2021 covering the entire value chain with an estimated combined savings of ~_1,400+ crore in FY2021. This was enabled by building a robust pipeline of improvement initiatives which will continue to deliver value in FY2022, strengthening the financial position.

The idea pipeline was built by conducting 150+ idea generation workshops ensuring the engagement of employees across all levels starting from the head of the departments to the shop floor personnel. Due to restrictions during the pandemic and lockdown, the primary focus of the initiatives was on cost optimization and cash conservation, along with throughput debottlenecking and value creation for ensuring long term sustainability. Key initiatives on cost that drove value across the organization include – coking coal blend optimization, IBRM (Iron Bearing Raw Materials) mix optimization, efficient energy management, raw materials cost optimization, fixed cost & working capital rationalization, contract consolidations, alternate sourcing of materials, rail and road network optimization and various advocacy measures.

Key initiatives on throughput include - debottlenecking across upstream units like Raw Material Handling System (‘RMHS’), Steel Melting Shop (‘SMS’), Hot Strip Mill (‘HSM’) etc. and multiple downstream units, maximizing the utilization of Direct Reduced Iron (DRI) kilns (7 kilns in operation) and reliability improvement by horizontal deployment of standardized maintenance practices for critical equipment. Besides these, the initiatives focussed on value creation including – customer diversification in multiple segments, ramping up volumes of branded products (including launching of three new brands – ColorNova, GalvaNova, GalvaRos), increasing the sales of value added products, external sales of DRI and various by-products (1st ever dispatch by rakes).

In addition, the Program focused on leveraging group synergies with Tata Steel group companies to increase use of captive raw material, optimizing product mix to maximize system benefits, horizontal deployment of best practices across the value chain, manufacturing of Tata Steel Limited (TSL) branded products at the plants and leveraging the channel and distribution network of TSL for increasing the share of branded products. The plant achieved multiple BPDs (best-demonstrated-performance) throughout the year across multiple cost & throughput parameters which accelerated the journey towards 5.2 MTPA of crude steel production. To sustain the momentum of the Program, multiple capability building sessions focusing on technical and functional areas like data analytics, data visualization, quality management systems, TQM methodologies etc. were conducted. More than 1200+ personnel were covered across the value chain in these customized training modules to enable the front-line workforce to be the torch bearers of change. Through the combined efforts of the entire team, multiple shining cases have been presented and awarded in various external forums like CII (Confederation of Indian Industry), AIMA (All India Management Association), Tata Innovista etc. In addition to these, the journey towards TQM (Total Quality Management) as a way of working has been initiated through the deployment of quality circles for SGA (Small Group Activity), DM (Daily Management) practices and VWM (Visual Workplace Management).

The organization has also started deploying multiple digital initiatives in the field of automation, visualization, simulation and optimization to create sustainable value. It has developed a 5-year digital roadmap with more than 80 projects identified and several pilot projects which have already been deployed. Few key highlights from digital initiatives include the Video Wall project at Basic Oxidation Furnace (BOF) Loco Scheduling Optimization for logistics cost reduction, Metallic Fe-Bearing IMM (Integrated Margin Management) module which led to cost reduction & optimization As the Be1 program enters into its 4th year, the focus is on sustaining the KPIs at the BDP levels, and achieving cost leadership with continued focus on Health, Safety & Environment and Quality. This shall be enabled by ensuring engagement of employees across all levels of the organization with a renewed focus on theme based ideation and capability building to identify and groom the next wave of change agents. Use of digital tools, advanced analytics and deployment of Centre of Excellence will further accelerate the journey by enabling TQM way of working and moving towards an innovation mindset. The Company is confident of scaling greater heights and setting industry benchmarks on this transformation journey.

G. SEGMENT WISE OR PRODUCT WISE PERFORMANCE

Post-acquisition in May 2018, a series of initiatives have been undertaken to unleash the potential of the Company. Despite being a challenging year with several months of lockdown, sales stood at 4.3 MTPA, which is 4% higher over FY2020 sales. Focused efforts in various areas for product mix enrichment & higher capacity utilization have started giving dividend, as summarized below:

Development of value added products – During the year the Company stabilized and commercialized API grades that cater to the Oil & Gas segment. Sales to this segment grew by more than 3 times in FY2021 over FY2020. Further the Company developed HR grades for the automotive wheels segment and for LM/CM for CVs during the year, helping to increase the presence in the auto segment. In the Precision Tubes business, value added products like Propeller Shaft Tube were developed & commercialized for Passenger & Commercial Vehicles and high end Cold Drawn Tubes were developed for Bobbin (Textile) and Engineering segments.

Development of new customers & market – With a focus on increasing its presence with leading automakers across the country, the Company started commercial supplies to leading two-wheeler manufacturers and passenger and commercial vehicle makers in western India, developed a two-wheeler manufacturer in southern India and initiated supplies to new customers in the Drums & Barrels segment during the pandemic. The Company opened up new territories in North East and Central India for its Colour Coated Business and developed new customers for HTSS products by tying up with packaging companies. In the Precision Tubes segment, the Company received approval from a leading passenger car manufacturer for the first time in northern India. Microsegment based approach helped in identifying new segments, which enhanced reach to end users. Large Dia Pipe mill products enabled the Company to bag orders from all leading Oil & Gas companies for Cross Country Projects and City Gas Distribution Projects. Branded Products viz., Tata Structura and Tata Pipes from Large Dia pipe mill have enabled successful entry into Airport Projects, Auditorium Projects, Large Water & Irrigation Projects in Karnataka, Andhra Pradesh and Telangana. In an endeavor to develop alternate markets to spread its base and to reduce dependency on the risky African Market, new customers and markets opened up in Latin America, Bangladesh and South - East Asia for coated and hi-end products.

Value creation through synergy initiative with parent organization - The technical and quality teams of TSBSL are working closely with TSL technology teams to develop new products to meet the requirements of customers. The Marketing and Sales teams of both organisations hold structured meetings to explore possibilities on enhancing customer service levels and to work on increasing share of business with common customers.

Launch of Branded Products - The Company through close collaboration with Emerging Corporate Accounts (‘ECA’), has been at the forefront of innovation on strategy, design and innovation and has introduced three new Coated ortProduct Brands, named GalvaRoS, GalvaNova and ColorNova, to address the unmet requirements of the ECAs.

GalvaRoS – Galvanised Plain Regular Spangled – Customers require of Galvanized Steel Sheets and Coils which are environment friendly, have superior corrosion resistance, available in customised sizes, giving better return on investments. GalvaRoS is 100% RoHS compliant and provides product authenticity. This customised product gives the customers a better yield and ROI and while strictly adhering to the BIS Standards. GalvaRoS is suited for various applications like Ducting, Heating Ventilation and Air Conditioning (HVAC), refrigerator back panel, PEB structures, Cable Trays etc. GalvaRoS is geared to meet the needs of value-creation, helping customers to navigate the sustainability journey.

ColorNova Pre-Painted Galvanised steels has been launched to cater to the ECA customers’ requirements of colours, designs and aesthetics which can be matched with home or office decors and at the same time be socio and environment friendly. The product has a superior surface finish and texture and is 100% RoHS Compliant. The Company’s world-class processing facility offers customised sizes to suit the diverse customer requirements.

GalvaNova, a 55%Aluminium-Zinc alloy coated product with superior performance has been developed to address the evolving needs of the Medium and Small Scale Enterprises. GalvaNova is an all-weather durable product with superior corrosion resistance, and has a distinctive white metallic sparkle in appearance. This environment friendly product is scratch protective and has cut-edge protection. Its anti-_nger print coating and brand marking adds to the brand’s authenticity. The product’s double layered protection coupled with excellent heat insulation properties enables longer life span of up to four times when compared to ordinary galvanised steel. The product is suitable for various segments including Appliances, HVAC, False Ceiling, Solar Applications, enabling a better yield while harnessing the power of endurance.

These brands have already proved to be the powerful products on which our ECA partners can create action plans that are eco-friendly as well as eco-e_ective and economic.

• Credit to Cash Conversion: A host of activities were carried out to reduce debtors. Customers were converted from credit to cash or to secured credit like Channel Financing, Factoring arrangement, Letter of Credit, Bank Guarantee, etc. This has helped reduce our days sales outstanding from 13 days in FY2020 to 8 days in FY2021.

Automotive & Industrial Products and Projects

The Company worked on rationalizing and segmenting its automotive customer base to improve serviceability and customer experience. A series of products were developed in order to deliver value to our key customers. So far 30 skin panels have been approved from HR produced from the Company’s Integrated Steel Plant (ISP) for one of the leading auto manufacturers. Our auto sales have increased by 11% over FY2021.The Company has improved its share of business with its key customers by 3-4% over FY2020 and overall market share in Automotive Segment by 1%.

Commercial supplies started to Tata Motors facilities at Pune & Sanand from our Khopoli Plant, thereby giving locational advantage to the group.

In a continued towards improving its basket of offerings, the Company has developed PPGI Embossed material for refrigerator and chest freezer application for one of its major appliance customers. This has helped to improve the market share by 3% in FY2021 over FY2020.

Special products H&T and HTSS registered 7% growth in sales over FY2020, which was enabled by development of new & improved grades for Bandsaw application and development of new customers.

The Company developed Antimicrobial Paint Coating for its colour coated product. These colour coated steel products are used in hospitals, clean rooms, transport, airports, cold storage, indoor infrastructure etc which need antimicrobial effect to eliminate secondary transmission of microbes (bacteria, virus etc.) through painted steel surfaces. In the present situation, many antimicrobial solutions/paints are available but with limited life time of few weeks to 2 years. The Company has developed antimicrobial paint which can be used as top coat in coil coated steel sheet products. These coated sheet products will retain the active antimicrobial functionality till the paint remains on the surface (more than 12 years). This novel antimicrobial paint kills the virus/bacteria. This addition of antimicrobial functionality in top coat paint does not require additional infrastructure to process the material in existing plant set up.

Branded Product & Retail (BRP)

With increased focus on branded products, the Company registered a sales growth of over 100% against FY2020 numbers.

To meet the evolving needs of ECA customers three new coated brands namely GalvaRos, ColorNova and GalvaNova were launched in FY2021.

Exploited unutilized capacity of HR Skin Pass by establishing value proposition and developing market for HR skin pass material enabling value added products sales through Distribution Channel.

Tubes and Pipes

The Company has maintained its leadership position in Precision

Tubes business for Automotive segment with market share of 24% in FY2021.

In Large Diameter Pipes, the Company crossed 100 KT of annual sales volume for the first time and registered 5% increase in sales volume over FY2020.

Bagged and completed supplies for three prestigious orders of Tata Structura for Lucknow Airport project, Safdarjung Airport project and Reliance Jamnagar Zoo (World’s Largest Zoo Project).

The Company has been focusing on Oil & Gas (O&G) segment and water pipe line projects in domestic and exports market and has bagged and executed several orders with major O&G companies for cross country pipeline (CCP) and city gas distribution (CGD) projects.

Exports

In order to mitigate the demand slowdown due to COVID -19 in the domestic market, the Company increased exports of both downstream as well as upstream products in H1 FY2021..

Overall exports clocked sales of 1.13 MTPA, a 26% increase over FY2020. Market development and new customer additions were the key enablers for this increase.

New customers were added in Galvanised, Galume, Colour coated, CRCA and in Hardened & Tempered steel segments which enabled TSBSL to achieve 20% higher downstream export sales over FY2020. The Company also expanded its customer base of CRCA and H&T in many other countries.

H. PRODUCT DEVELOPMENT: Hot Rolled Product

The Company developed 50CrV4 & 58CrV4 at Angul for replacement of POSCO materials (localization strategy). In Auto segment, BSK 46 for chassis application and Fe 360 & WIR019 grades for Disc & Rim application were developed for our key customers.

Cold Rolled and Coated Product

CRCA: The Company developed and obtained approval for 10 Skin Panel grades for commercial vehicle segment of Tata Motors, Pune. Further development of IF grade CRCA material for two-wheeler rear and front fenders for a leading auto maker was also achieved and the Company started commercial supplies in HSLA 340 grade steel having application in commercial vehicle floor panels.

Colour Coated Products: Developed colour coated products for body panels of washing machine and refrigerators for a few leading multinational companies in the appliance business. The Company also developed colour coated coil brand named ColorNova.

Tubes & Pipes: Propeller Shaft Tubes were developed and approved for commercial supplies for a leading Auto Manufacturer. The Company alsodeveloped dent resistance ERW tube (0.50 X 41.28, 0.70 X 41.28).

Galvanised products: Developed high strength GPCS (Galvanised Plain Crushed Spangle) material for PEB (Pre-engineered Building) segment.

. ENVIRONMENT

Since its acquisition in May 2018, the Company has embarked on a fundamental transformation journey. Energy Conservation, Environment Protection and maximizing reuse & recycling practices and socio-economic upliftment of communities remain the core of the business strategy of the Company. The Company has imbibed a systematic management approach for continual improvement in its operational performance through process innovation, resource efficiency and adoption of best available technologies (BAT) for sustainable development. These initiatives have resulted in significant improvement in sustainability performance. During FY2021, the COVID-19 pandemic posed a tremendous challenge on production and sales of steel industries due to mobility restrictions, safety of employees and other stakeholders. Despite this challenge, the Company could manage to perform well in the fields of environment & sustainability. Major highlights of environmental achievementsduring FY2021 are given below:

Statutory

Consent to Operate (CTO) has been renewed up to March 31, 2023. This is the first time since commissioning of the steel plant that a CTO for two years has been granted.

Hosur unit has obtained CTO for 10 years which is valid till March 31, 2031.

CTO for Sahibabad Tubes Plant received with extended production capacity of 10,000/ month, valid up to 2025.

CTO received for Pilkhuwa Stock Yard for 5 years.

Received permission from Central Pollution Control Board for LD sludge Briquette trial for Ardent Steel, which is an important milestone for utilization of LD sludge in our journey of exploring opportunities on circular economy principles.

For disposal of Fly ash, CTO has been obtained for different stone queries and low-lying areas like Saptasajja, Rangagola and Tarkabeda.

Others:

The ISP at Angul has been certified with ISO14001 (Environment Management System) & ISO 45001 (Health & Safety Management System)

In order to increase the green coverage in all its operational locations, a total of 81,571 saplings have been planted by the Company in FY2021.

ISP at Angul has dispatched 20 rakes with capacities of 70023

MT of Fly ash through rake. This is a unique initiative by TSBSL in consultation with East Coast Railway which has contributed to reduction in scope 3 carbon emissions of 5,000 tons in FY2021.

The Companys plants at Sahibabad and Angul have successfully completed rainwater harvesting projects of capacity 5,70,00 cu.mm and 1,50,000 cu.mm per annum respectively.

Performance of Key Environment Indicators:

14% reduction in dust emission from 0.84 kg/tcs (FY2020) to 0.72 kg/ tcs (FY2021).

2.8% reduction in Specific Water Consumption from 4.14 m3/tcs (FY2020) to 4.02 m3/tcs (FY2021).

50% increase in wastewater recycling from 2 MGD (FY2020) to 3 MGD (FY2021).

18% Increase in solid waste utilization from 78% (FY2020) to 96% (FY2021).

Initiatives to reduce Energy Consumption & Emissions: For

CO2

reducing carbon footprint, the Company is pursuing the implementation of innovative low carbon technologies. Due to the COVID-19 pandemic, crude steel production was lower in FY2021 as compared to FY2020. Nevertheless the Company has managed to reduce its overall CO2 emissions from 12.3 million ton in FY2020 to 11.5 million ton in FY2021. In pursuit of resource efficiency and cleaning the power mix, the Company is increasingly using waste gas and waste heat for power generation which accounted for 82% of total power generation in FY2021. Energy consumption by DRI process has also been reduced to 82 kWh/t of DRI in FY2021 from 87 kWh/t of DRI in FY2020. The Company has started construction work for Coke Dry Quenching unit for Coke Oven -1 which will further enhance our energy efficiency. Commissioning of PCI injection mill, reduction in specific coal consumption in Power Plant, DCS (Distributed Control System) based process optimization in 250 TPH Boiler, enhancement of turbo blower efficiency etc. were some of the key initiatives implemented during FY2021.

Improvement in Ambient Air Quality in and around our Steel Plant Point & nonpoint source emissions are major contributors in steel industries for degrading ambient air quality. Post-acquisition, the Company has given focussed attention towards improving its source emissions. Technological improvements like power supply to electrostatic precipitators (ESP) using high frequency transformer recti_er/micro pulse-based recti_er, revamping of old ESPs & Bag Filters, contributed significantly in reducing the stack emissions. Implementation of dust extraction and dust suppression systems especially in Junction Houses, Lime Plants, implementation of IVC (Industrial vacuum cleaner) system and automatic wheel washing systems contributed positively to improve stack & fugitive emissions. Further, standardization of maintenance procedures, spillage reduction in conveyers by installation of new technology of sealing by using double skirt rubber hoses helped to reduce fugitive emission significantly. Completion of the above major improvement projects enabled the Companys plant at Angul to reduce its dust load from 0.84 kg/tcs (FY2020) to 0.72 kg/tcs (FY2021).

Water Conservation

Water is an essential part of steel making processes specially for power & steam generation, cooling, slag granulation etc.

The Company’s Sustainability Framework and Environment Policy subscribes to water conservation philosophy which principally relies on the 5R principles of Reduce, Reuse, Recycle, Recover and Recharge. With continuous efforts to make steel making more water efficient, the Company has taken significant initiatives for water conservation and has increased its wastewater recycling from 2 MGD (FY2020) to 3 MGD (FY2021). Use of harvested rainwater from HDPE (High Density Polyethylene) lined rainwater harvesting pond was also significant. With these initiatives, TSBSL has achieved reduction in specific water consumption from 4.14 m3/tcs in FY2020 to 4.02 m3/tcs in FY2021.

However, the most significant achievement was successful commissioning of Ultra Violet (‘UV’) reactor technology for removal of total cyanide from coke oven wastewater by the Environment Research & Development team. Another significant achievement was the attainment of Zero E_uent Discharge at the Khopoli Plant by installing Reverse Osmosis (‘RO’) and Multiple Effect Evaporator (‘MEE’). Further, the Companys downstream unit at Sahibabad has successfully implemented rainwater harvesting and ground water recharge structures both inside the plant and in nearby villages by adopting ponds. Approximately 5.7 lakh m3 of rainwater has been harvested in FY2021.

Solid Waste Management:

In the area of circular economy, the Company has undertaken various initiatives to manage solid waste in an environment friendly, socially responsible and techno-commercially viable manner. Utilization of LD slag has increased significantly from 46% (FY 2020) to 66% (FY 2021). Overall solid waste utilization has increased to 96% in FY2021. The Company has put in various efforts to increase the LD slag utilization by installation of Metal Recovery Plant, developing market for sustainable use in Brick & Cement manufacturing, increasing utilisation of slag for making value added products. Ash utilisation remains 100% in FY2021 through utilisation in paver block, brick, cement and road construction. Supply of _y ash through rake to the north-east market opened a promising future of _y ash utilisation. Other Solid wastes generated from the steel plant were recycled in sinter making. To make this process more scientific, the Company has installed a process solid waste mixing and screening facility in FY2021 to make more efficient use of solid waste in sinter making.

Plantation and Greenery:

Green cover contributes towards better air quality and acts as a carbon sink. The Company is continuously increasing the percentage of green cover across its Indian operations under the stewardship of its horticulture department. The area of plantation was enhanced by incorporating places outside the plant premises and integrating plantation under CSR activities for the area beyond the plant boundary. To speed up plantation, a planned approach was adopted. The Company implemented the much sought-after Japanese method of plantation, Miyawaki method which was adopted with technical guidance from IIT Kharagpur. As a result, a thick green cover of 45,000 plants has come up near the boundary wall in Angul. Similar growth has been witnessed across the other plant locations of the Company at Khopoli, Maharashtra and Pilkhuwa, Uttar Pradesh. A project on Miyawaki method of plantation was also been successfully implemented in 3,200 sq.m area along Sarpa LD slag dump of the Companys ISP at Angul.

Accolades

Besides the above, in FY2021 the Company has received commendations for significant achievement in Environment Management from several Institutions of repute. Few of them are Global Sustainability Award 2020 in the ‘Platinum Category’ by Energy and Environment Foundation,

Platinum Winner of Green Leaf Award, 2019 by Apex India Foundation for its achievement in Water Stewardship for Sahibabad unit. Whereas Khopoli & Angul have been declared as Gold Award Winner for their outstanding achievement in Environment Excellence. The CII has also recognized Angul unit as Noteworthy Water Efficient Unit.

J. SAFETY

As a Tata Group company, we are committed to "ZERO HARM". With this goal in mind, the Company has started its safety excellence journey by mobilizing all possible resources to establish a 3600 Safety Management System in the workplace. Following initiatives were taken under aegis of Six Step Safety Strategy.

Leadership:

Certified with ISO 45001:2018 by Bureau Veritas.

STOP programme: An initiative to stop unsafe practices has been introduced for the first time.

5 Safety campaigns (Material Handling, Positive Isolation, STF,

Railroad & Logistics and COVID-19) have been organized.

Fortnightly theme-based safety campaign was launched at all locations with specific themes.

External Safety Audit was carried out at Angul by M/s. Dekra (India) Pvt. Ltd.

Capability & Competency Development:

Audits by cross functional teams across the plant have been started based on six safety standards.

E-learning programme on safety standard was launched.

Process Safety Management:

CoE has been rolled out in seven departments.

On-site Emergency Preparedness Plan has been revised.

HIRA and Red SOP concept has been started.

Mock drill conducted at LD Gas Holder in presence of the District

Crisis Group members (District Authorities).

Contractor Safety Management:

The process of New Vendor Registration and Sub-contracting has been introduced at Angul.

Final star rating assessment for 36 vendors is being carried out by 3rd party at Angul.

Rail & Road Safety:

CCTV cameras have been installed at major roads with monitoring centre at Safety Office.

Driver fatigue monitoring system has been installed at Angul on an experimental basis.

Designated arrangement to cover/uncover tarpaulin from outgoing/ incoming vehicles.

First auto-mechanized door system on locomotive has been installed at Angul to prevent accidental man slipping from a running locomotive.

Health & Hygiene

Developing health index system for employees and contractor workmen. Considering, the management’s commitment of safety for all stakeholders, the organizational focus is on Risk Assessment, Ranking and Decision making for elimination of hazards and minimization of risk at workplace through safety competencies & safety processes, such as

Development of Safety Induction Training Facility with aid of visuals and working/static model (SLDC)

Skill development training to TSBSL contractor employees through JNTVTI.

E-learning training on applicable safety standard to TSBSL employees.

Learnings from fatal incidents at TSL for the past 15 years and deployment of recommendations thereof at TSBSL.

Develop Risk Heat Map based on HIRA & HAZOP.

CoE deployment at four new departments.

Fencing of rail tracks.

Procurement and Installation of heavy vehicles simulator.

Develop high risk vendors to 3-star rated vendors.

Contract Workforce tracking system.

Wellness at workplace program.

It is important to note that the desired safety performance of ZERO HARM can be achieved only with the involvement and commitment of all stakeholders. The Company has chosen IT as the key enabler to take the safety journey forward.

K. RISKS AND CONCERNS

The global steel output growth momentum stalled since the later half of FY2019. Steel production growth rates were down to 3% in the last quarter of FY2020 mainly due to a sharp fall in steel prices and high price of raw materials. This growth rate was thoroughly affected by the COVID-19 pandemic in 2020 and has become negative. COVID - 19 is an unprecedented crisis expected to have a multi-year effect. The lifting of the lockdown and liquidity injection has aided economic recovery from sharp contraction in the early half of 2020. Demand for steel started recovering in H2FY2021. If an effective vaccine is successfully distributed by end of 2021, demand will continue to increase in 2022. As a result of suppressed demand in 2020-22, the necessity of stock replenishment and government investments shall increase. Steel consuming sectors were disrupted and recovery in manufacturing will likely to be moderate while construction will continue to be resilient. Steel Production recovery was also led by China in the later half of 2020, recording an all-time high production while rest of the world had a low utilization. China will continue to perform better than forecasts driven by stimulus. While China’s demand will remain high, slower recovery will be seen in rest of the world. China’s investment in infrastructure has led to a surge in demand for commodities, especially steel. Healthy revival in India, Iran, Turkey coupled with stable demand in South - East Asia will support recovery in 2021. Steel prices and spot spreads have increased sharply from the lows in June 2020. Domestic steel prices have witnessed significant uptick in the past few months with resurgence in demand and strong international prices. However, this sharp surge has raised concerns about sustainability with inflation having emerged as a key risk given the supply chain disruption and the excess liquidity. Other than the pandemic, geopolitical tensions abound and have the potential to escalate into a significant event which can adversely impact global economic and financial conditions. The geopolitics of COVID-19 will shape the global business environment as the debate on self-reliance will continue to heat up. Moreover, increasing coronavirus cases in USA and Europe might pose a fresh risk to the global economy.

The pandemic has taken a major toll on India’s economy with real GDP contracting by an unprecedented 23.9% year-on-year in the second quarter of 2020, the largest decline among all major economies. In H1FY2021 recovery has been largely driven by infrastructure & rural demand. Recovery paced up in H2FY2021 with pickup in urban consumption & festive demand. Recovery in FY2022 will be driven by continued stimulus and consumption supporting union budget with strong government spending in infrastructure as envisaged in NIP, NHAI projects. However, concerns will remain over soaring Government debt, fiscal deficit, relatively high inflation constraining the monetary policy, further policy rate cut.

In FY2021, the Company focused on value chain excellence, overall operational excellence, pandemic & crisis management, responsible steel, throughput maximization, enriching product mix, customer centricity with diversification of customer base, sustainable initiatives, employee engagement, synergy & integration and leveraging IT & digital to survive the most critical situation due to pandemic. The Company consolidated its position through robust liquidity management & deleveraging and working capital optimization with better inventory planning.

A Risk Management Framework was implemented in the Company in FY2020. This Enterprise Risk Management (ERM) process encapsulates risks for the functional units across all locations with robust risk identification and mitigation mechanisms for management reporting as per risk governance structure. During FY2021, Tata Steel BSL has chosen IT as the key enabler to take the ERM journey forward, by introduction of BRISK – a web based risk intelligent platform, to monitor the overall risk management process of the organization.

L. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Board of Directors of the Company and Audit Committee are responsible for ensuring that Internal Financial Controls have been laid down in the Company and that such controls are adequate and operating effectively. The foundation of Internal Financial Controls (‘IFC’) lies in the Tata Code of Conduct (‘TCoC’), policies and procedures adopted by the Management, corporate strategies, annual business planning process, management reviews, management system certifications and the risk management framework.

The Company has an IFC framework, commensurate with the size, scale and complexity of its operations. The framework has been designed to provide reasonable assurance with respect to recording and providing reliable financial and operational information, complying with applicable laws, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance with corporate policies.

The Management monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of management, process owners undertake corrective action(s) in their respective area(s) and thereby strengthen the controls.

The Audit Committee reviews the reports submitted by the management. Also, the Audit Committee has independent sessions with the external auditor and the Management to discuss the adequacy and effectiveness of internal financial controls over financial reporting and internal financial controls respectively.

M. HUMAN RESOURCE DEVELOPMENT / INDUSTRIAL RELATIONS

With an employee strength of ~ 5,800, the Company strives to become an Employer of Choice. To achieve this goal, Company HR Policies and Practices have been geared up. Safety continues to be of utmost importance and deployment of safe practices has been done with a view to develop safe behavior as well as safe workplace. The leadership has been a role model and has provided all the support to develop good HR practices, so that employees are nurtured well and are positively engaged.

While health and well-being of employees remains as an area of importance, it attracted a lot of focus during the last year due to the COVID-19 pandemic. All steps were taken to provide proper healthcare to employees including their families in the times of crisis. The work and the workplace has seen a major shift and remote working was promoted as a new normal to break the chain of the pandemic. Financial security of the direct and indirectly engaged employees was ensured during the time of crisis. Several policies to address various unique concerns of the employees during the pandemic were also deployed

Employee Productivity continued to be the focus area during the year and various initiatives were deployed to improve the same. Specific focus was given to build talent/ capability in key areas i.e safety, environment, TQM and Data Analytics.

The Performance Management System witnessed an increased rigor by introduction of a 4-tier performance review process. Contribution of employees to ensure business continuity during the pandemic period was recognised.

A scientific process based approach was adopted to rationalize the multiple levels that was existing in the Company. The exercise empowered employees, provided parity at similar levels and roles across different functions while providing transparent career path to employees. As a result of the exercise, 6 distinct Job Band were implemented in the company.

The Company continued to focus on cultural assimilation of employees into the Tata way of life and many initiatives were rolled out during the year for promoting cultural bonding. Capability Development of employees was one of the thrust areas during the year and the mode of virtual learning was leveraged for such capability development programs.

The Company’s continued focus on improving diversity has shown positive result with increase in women employees in the workforce.

For enhancing employee experience, Human Resource Information System (HRIS) has been further strengthened and various employee-friendly modules were rolled out during the year.

Industrial relations during the year were harmonious. Employees have contributed significantly towards the growth of the organization.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing the Company’s estimates and expectations may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied.